Forming an LLC?

[Barry_Green]

It's strange to hear that Texas is so expensive. Forbes recently did a feature on the best states to form a business and Texas was surprisingly #1. California, not all that surprisingly, was #50.

Texas fees for starting a corporation are fairly high; registering a foreign (other-state) corp to be eligible to do business in texas is a $750 fee.

But there are many, many, many other considerations besides just initial fee. Not the least of which is tax structure (Texas is pretty good, not ideal) and worker base and overall economic vibrancy. Texas' economy is better than just about anywhere in the USA, cost of living is low, quality of life is high. A few extra pennies spent on a filing fee pale in comparison to the other benefits.

Taxation -- no personal income tax is great, and no general state business income tax is also good, but it's not ideal because Texas imposed what they call the "margins" tax, which is in effect a 1% state income tax on corporations. It cascades through all levels of business, so it adds up to far more than 1% -- for example, if you sell basketball hoops, you pay 1% of your sales to the state. But you have to buy nets from someone -- and that net-seller pays 1% of her sales to the state. And the net-seller had to buy the cord from someone, and that cord-seller pays 1% of his sales to the state. So that "minimal" 1% tax actually ends up being far more by the time it hits the end consumer.

However, for most entrepreneurs setting up a corp, it's of minimal concern, because there's an exemption of the first million dollars of revenue. (drops to $600k of revenue after 2012).